2018 (6) TMI 370 - AT - Central Excise

Clandestine removal - entire SCN is based on the alleged difference in the stock - no proper evidences found - Held that - In absence of any positive evidence of clandestine removal of goods, merely on the strength of the alleged shortages, demand of duty on the charge of clandestine removal of goods cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of demand and imposition of penalty based on alleged differences in stock balance without evidence of clandestine removal.

Analysis:
The appeal was filed against the confirmation of demand and penalty by M/s Amforge Industries Ltd. for alleged discrepancies in stock balance. The officers visited the units and found the book balance of stock to be higher than the physical stock declared by the Plant Incharge. The appellant's Internal Auditor explained that discrepancies arose due to items being scrapped without proper documentation, resulting in inflated book stock. The Counsel argued that no physical stocktaking was conducted, no evidence of clandestine clearance existed, and the show-cause notice solely relied on differences in stock balances. Reference was made to the adjustment of closing stock after annual physical stocktaking and legal precedents emphasizing that shortages in finished goods do not necessarily indicate clandestine removal.

The Tribunal considered the absence of positive evidence of clandestine removal and emphasized that mere shortages in stock do not justify imposing duty on charges of clandestine removal. The Tribunal highlighted previous cases where demands and penalties were set aside due to insufficient evidence and the inability to verify facts of alleged clandestine removal. The Counsel for the Revenue stressed the difficulty in verifying the truth in cases of alleged clandestine removal, but the Tribunal ultimately concluded that without concrete evidence, demands based solely on alleged shortages cannot be upheld.

In conclusion, the appeals were allowed, and the Tribunal ruled in favor of the appellants, emphasizing the importance of concrete evidence to substantiate charges of clandestine removal and rejecting demands based solely on discrepancies in stock balances without proof of wrongdoing.